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Time may be right for connectivity kit supplier to seek buyer
Thursday 10 Aug 2017 Author: Steven Frazer

Connectivity kit designer Telit Communications (TCM:AIM) saw its share price smashed on a half year plunge into the red, cuts to growth targets and an axed dividend. That disappointment sent the stock crashing from 257.5p on 7 August to 150p, bouncing to 172.5p the following day.

Delays in getting appropriate certifications for new products in the US, a spike in research, development and working capital costs and hints that large scale deployments may be delayed did the damage.

Squeezed cash leaves the company with $9m of net debt versus net cash expectations. This comes just two months after the company raised $50m of new funding at 340p per share. Analysts at Canaccord believe previous acquisition plans will now have to be out on hold.

Big news 1§

We believe serious questions about the company’s future as an independent are now likely to be asked. Telit sees its growth future in supplying high margin services to the potentially enormous internet of things connected environment. Yet around 90% of its revenue still comes from mobile, wi-fi and narrowband wireless hardware sales, according to the respected technology website TechMarketView, where sales cycles can be long and unpredictable.

Almost every large mobile network operator, telecoms supplier and IT services companies all jockeying for market share in the internet of things space, Telit may find its future may be as part of a much bigger and financially powerful organisation.

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